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Sovereign Bancorp posts $1.6 billion loss

Source:Reuters.com Author:Jonathan Stempel Date:03/25/14 Click:

NEW YORK (Reuters) - Sovereign Bancorp Inc (SOV.N), the second-largest U.S. savings and loan, on Wednesday posted a $1.6 billion quarterly loss and canceled its dividend following a larger-than-expected write-down for consumer credit losses and a 2006 bank acquisition.

The fourth-quarter net loss equaled $3.34 per share, and compared with a loss of $129 million, or 28 cents per share, a year earlier.

Operating profit, excluding charges, fell 44 percent to $94 million, or 18 cents per share, from $167 million, or 33 cents, a year earlier, Philadelphia-based Sovereign said.

Analysts on average expected profit of 16 cents per share, according to Reuters Estimates. Forecasts by analysts typically exclude one-time items.

Sovereign canceled its 8 cents per share quarterly dividend "to help bolster capital and mitigate risk during the ongoing challenges in the financial services industry," Chief Executive Joseph Campanelli said in a statement. It expects to pay a dividend once "industry conditions normalize," he said.

Sovereign wrote down $1.58 billion of goodwill, or $3.08 per share, which was $180 million more than it estimated on January 14. It attributed the increase to interest-rate changes that affected its consumer and New York-area operations.

Part of the write-down reflected weakness in consumer lending, which has been hurt by deteriorating credit and a decision to halt auto loans in southeast and southwest U.S. states. The rest covered New York operations, which consist largely of the former Independence Community Bank Corp.

As expected, Sovereign also took a $180 million charge for mortgage investments, reducing earnings by 23 cents per share.

Critics had complained when the company's former chief executive, Jay Sidhu, paid $3.6 billion for Independence, and simultaneously sold a 20 percent stake in Sovereign for $2.4 billion to a Spanish bank, Banco Santander SA (SAN.MC). Santander's stake later rose to about 25 percent.

Sovereign is one of many banking companies this month to announce write-downs related to deteriorating credit conditions. It joined Citigroup Inc (C.N), National City Corp (NCC.N) and Washington Mutual Inc (WM.N), the largest U.S. thrift, among companies to cut their dividends since November.

Sovereign operates about 750 banking offices in eight Northeastern U.S. states, and ended the year with $84.7 billion of assets.

On a day of broad gains in the banking sector, Sovereign shares closed Wednesday up $1.03, or 10.2 percent, at $11.15 on the New York Stock Exchange.

Sovereign announced results after markets closed. Through the close, the shares were down 54 percent in the last year, while the KBW Regional Bank Index (.KRX) was down 24 percent.

(Editing by Gary Hill, Phil Berlowitz)

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